Weighing the Options of Refinancing
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Some have said that only in the case your new interest will be at least 2 points below your current rate, should you refinance your loan. Maybe that was sound advice a number of years ago, but as refinance costs have been falling recently, it may be a good time to look into it. Refinancing your mortgage has some benefits that will often make it worth the initial expenditure several times over.
You may be able to bring down your interest rate (sometimes by a lot) and reduce your monthly payment amount with your refinanced mortgage loan. You could also have the option to "cash out" some of the built-up equity in your residence, that you can use to take care of higher interest debts, improve your home, or plan a vacation. With lower rates, you might also be able to build your home equity more quickly by moving to a shorter term mortgage.
As you probably expect, you'll have to pay for the the refinance process. With your refinance, you are paying for basically the same things you paid for during your existing mortgage. Included in your costs will probably be an appraisal, underwriting fees, lender's title insurance, settlement costs, and other fees.
Doing the Math
You might investigate paying points to reduce your interest rate. If you pay (on average) 3% of the loan amount at the start, the savings for the term of the new mortgage can be great. You may be told that points can be deducted on your income taxes, but since tax regulations can be ever-changing, we urge you to consult a tax professional before making decisions based on this.
Another cost that a borrower may consider is that a reduced rate of interest will reduce the interest amount you will be able to deduct on your federal income taxes. Call us at 562 320-0510 to help you do the math.
Ultimately, for most borrowers the total of initial costs to refinance will be paid back soon in savings each month. We can help you explore what your options are, considering the effect a refinance might have on your taxes, how likely you might be to sell in the near future, and your cash on hand. Call us at 562 320-0510 to get started.
Want to know more about refinancing? Call us at 562 320-0510.